AA Plc (AAAA) SWOT Analysis / TOWS Matrix / MBA Resources
Business Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AA Plc (United Kingdom)
Based on various researches at Oak Spring University , AA Plc is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing transportation and logistics costs, there is backlash against globalization, challanges to central banks by blockchain based private currencies, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AA Plc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AA Plc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AA Plc operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of AA Plc can be done for the following purposes –
1. Strategic planning of AA Plc
2. Improving business portfolio management of AA Plc
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AA Plc
Strengths of AA Plc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AA Plc are -
Innovation driven organization
– AA Plc is one of the most innovative firm in Business Services sector.
Low bargaining power of suppliers
– Suppliers of AA Plc in the Services sector have low bargaining power. AA Plc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AA Plc to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– AA Plc has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Business Services industry
– AA Plc has clearly differentiated products in the market place. This has enabled AA Plc to fetch slight price premium compare to the competitors in the Business Services industry. The sustainable margins have also helped AA Plc to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of AA Plc comprises – understanding the underlying the factors in the Business Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- AA Plc is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at AA Plc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AA Plc emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– AA Plc has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Business Services industry. Secondly the value chain collaborators of AA Plc have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of AA Plc
– The covid-19 pandemic has put organizational resilience at the centre of everthing AA Plc does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– AA Plc is present in almost all the verticals within the Business Services industry. This has provided AA Plc a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of AA Plc in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– AA Plc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AA Plc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– AA Plc is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Business Services industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of AA Plc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AA Plc are -
Need for greater diversity
– AA Plc has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, AA Plc has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Business Services industry over the last five years. AA Plc even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High dependence on AA Plc ‘s star products
– The top 2 products and services of AA Plc still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though AA Plc has relatively successful track record of launching new products.
High cash cycle compare to competitors
AA Plc has a high cash cycle compare to other players in the Business Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of United Kingdom, AA Plc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of AA Plc strategy
– From the outside it seems that the employees of AA Plc don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring in Business Services industry
– The stress on hiring functional specialists at AA Plc has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– From the 10K / annual statement of AA Plc, it seems that company is thinking out the frontier risks that can impact Business Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, AA Plc has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners in Business Services industry
– because of the regulatory requirements in United Kingdom, AA Plc is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Business Services industry.
Ability to respond to the competition
– As the decision making is very deliberative at AA Plc, in the dynamic environment of Business Services industry it has struggled to respond to the nimble upstart competition. AA Plc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
AA Plc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AA Plc are -
Better consumer reach
– The expansion of the 5G network will help AA Plc to increase its market reach. AA Plc will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– AA Plc can use the latest technology developments to improve its manufacturing and designing process in Business Services sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AA Plc in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, AA Plc is facing challenges because of the dominance of functional experts in the organization. AA Plc can utilize new technology in the field of Business Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AA Plc can use these opportunities to build new business models that can help the communities that AA Plc operates in. Secondly it can use opportunities from government spending in Business Services sector.
Buying journey improvements
– AA Plc can improve the customer journey of consumers in the Business Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at AA Plc can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Business Services industry.
Developing new processes and practices
– AA Plc can develop new processes and procedures in Business Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help AA Plc to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for AA Plc to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Business Services industry, but it has also influenced the consumer preferences. AA Plc can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. AA Plc can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions in Business Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for AA Plc in the Business Services industry. Now AA Plc can target international markets with far fewer capital restrictions requirements than the existing system.
Threats AA Plc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AA Plc are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for AA Plc in Business Services industry. The Business Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of AA Plc
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of AA Plc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– AA Plc needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. AA Plc can take advantage of this fund but it will also bring new competitors in the Business Services industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AA Plc can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate AA Plc prominent markets.
Easy access to finance
– Easy access to finance in Business Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AA Plc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of AA Plc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AA Plc may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Business Services sector.
Regulatory challenges
– AA Plc needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Business Services industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Business Services industry are lowering. It can presents AA Plc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.
Stagnating economy with rate increase
– AA Plc can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Business Services industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. AA Plc will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Weighted SWOT Analysis of AA Plc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AA Plc needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of AA Plc is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of AA Plc is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of AA Plc to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that AA Plc needs to make to build a sustainable competitive advantage.